Proper and efficient carbon accounting is instrumental in the transition to a climate neutral economy. The climate impact of products and companies is key information to design and implement a climate strategy.
Dedicated carbon accounting software can help in making carbon accounting more efficient and less prone to error. Just as financial bookkeeping has evolved beyond Excel sheets, the same transformation is underway in carbon accounting.
This blogpost shares 3 important trends and 1 insightful advice on the landscape of carbon accounting software providers.
# 1 There are a lot of solutions out there, a lot
At Carbon+Alt+Delete, we actively track more than 150 providers of carbon accounting software—a number that likely underestimates the true breadth of the landscape. So there are many.
Carbon accounting software is not a “winner takes all market”, unlike industries with strong network effects such as social media software. Therefore it makes sense that specific software solutions exists depending on the exact needs of different users. For instance, a sustainability manager in a multinational cement company might have different expectations from a carbon accounting software then a sustainability manager in a small service company. That is also why in the financial software landscape, you also have a variety of solutions going from Quickbooks for SMEs to SAP for large multinationals.
However, it’s the consensus in the carbon accounting industry that there are too many carbon accounting software players out there. Today’s overcrowded landscape is partially caused by abundant and cheap investment capital for start-ups in 2020-2021. As a result, many start-ups have been able to raise money, even without a solid product or client base. It is to be expected that some of those software players will disappear over the coming 1 to 2 years.
# 2 Is a nascent and scattered market
The carbon accounting software space is a nascent market. Most of the players only exist for 3 to 5 years. Linked to this, it are mainly smaller players with only a handful of players having teams of 100 FTE or more.
Besides being a nascent market, it’s also a scattered market. You have software players focused on corporate carbon footprint, product carbon footprint, life-cycle analysis, ESG reporting, etc. There is not (yet) a solution that fits all, although some marketing teams might claim the contrary.
Going forward, it is to be expected that there will be a consolidation wave. In such a wave, different promising carbon accounting tools will be brought together into one offering, covering various aspects and needs linked to carbon accounting. It’s hard to predict when this will happen, but most likely in the time horizon of 2 to 5 years.
# 3 Different go-to-markets: advisory services vs. managed services vs. software-only
Different software players use different go-to-market strategies. Broadly speaking there are 3 different strategies.
- Advisory Services Focus: Historical consultancy firms with proprietary software tools targeting larger companies capable of using carbon accounting platforms in-house but seeking specialized advisory support. Notable examples include ClimatePartner and CoolPlanet.
- Managed Services Emphasis: Dominated by start-ups/scale-ups combining software development with sustainability consultants to assist companies in utilizing the software. This approach caters typically to mid-sized to large companies. Examples encompass Sweep, Normative, and PlanA.
- Software-Centric Focus: Concentrating solely on providing carbon accounting software, targeting sustainability consultants in need of efficient, digitized solutions for their clientele. This approach characterizes entities like Carbon+Alt+Delete.
There is probably business value in all 3 go-to-markets. However, the jury is still out there on what’s the most promising go-to-market strategy.
How to navigate this market?
There are 2 key takeaways of the above, which hold true both for sustainability consultants and companies needing to report on their carbon footprint.
- Initiate action, avoid rigidity: Commence your journey today, selecting the best available software for your current needs while evading entrapment in case of unforeseen challenges. Starting is essential for learning, but flexibility prevents long-term constraints.
- Prioritize the core engine: When evaluating software tools, focus on the quality of the core carbon accounting engine—the backbone ensuring compliance with standards like the GHG Protocol, level of detail, and user-friendliness. While functionalities can be added or updated, altering or enhancing the core engine mirrors changing brakes on an F1 car racing at 300 km/h—it’s a risky maneuver that could lead to a crash.
In summary, the landscape of carbon accounting software is a dynamic realm of possibilities and challenges. Embracing these trends, understanding the diverse players, and navigating strategically will empower sustainability experts and companies to steer towards a greener future.
PS: please reach out to Kenneth.vandenbergh@carbonaltdelete.eu if you would like to have access to our database of carbon accounting players.
